2009 RMD rules for an IRA

Dear Tax Talk,
Regarding the required minimum distribution, or RMD, on an IRA for those age 70½: Can a withdrawal taken earlier this year be put back, because of the ruling that no distribution need be taken in 2009?
-- Jacobsen

Dear Jacobsen,
Due to the decline in most retirement accounts from the stock market's dismal performance in late 2008, Congress suspended the RMD rule for 2009.

Normally, an individual older than 70½ must take a minimum distribution from his or her IRA annually. Many folks, especially older ones, were upset that they would be forced to sell deflated assets to satisfy this requirement.

This led Congress to grant the suspension for 2009 only. For 2009, you are not required to take a minimum distribution from your traditional IRA. This waiver applies to IRA participants as well as beneficiaries. The waiver also applies if you turn 70½ in 2009 and delay your 2009 RMD until April 1, 2010.

If you received a distribution in 2009 that otherwise would be an RMD, you can roll over that amount into another IRA or eligible retirement plan within 60 days of the distribution. If the 60 days have passed, you cannot reverse the distribution for 2009.

The waiver may not make sense to some taxpayers where the distribution does not add to the amount of taxes they would otherwise owe. In this situation, the individual can go out and purchase the same "deflated assets" in a conventional investment account and hope for a rebound without additional tax consequences.

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